Outsourcing rebates benefits builders, buyers, suppliers

Daily Record and the Kansas City Daily News-Press, Dec 2, 2005 by Becky Hurley

(This article originally ran in Colorado Springs Business Journal, Colorado Springs, CO, another Dolan Media publication.)

Building supply companies like Kohler, Mohawk Carpet, Atrium Windows and Boise-Cascade, spend millions of marketing dollars each year pursuing orders from the homebuilding industry's biggest purchasers.

National trade associations do not offer supplier rebates or discount programs, so most vendor marketing is aimed at the industry's top 400 builders.

In Colorado Springs, national companies Lennar, Richmond American, Beazer and Pulte Homes benefit from deals and discounts arranged by their corporate purchasing departments. The cost- savings are generated through volume purchases and rebates.

The top 400 builders account for only 32 percent of the total building supply market, according to Professional Builder Magazine. So what about the other 68 percent, which represents more than 22,000 homebuilders? How do they compete when buying lumber, hardware, carpet, countertops, insulation material and gypsum wallboard?

Local and regional contractors build dozens of home a year, and operate with lean staffs. Unless someone was assigned to rebate and discount paperwork follow up, a lot of times it just didn't happen, said Charlie Schneider, owner of Builder Sourcing.

As a former purchasing manager for M.D. Holdings Inc., parent company of Richmond American Homes, Schneider has negotiated hundreds of deals for building materials.

He left the company in 2004 to launch his own Denver-based enterprise. Inspired by what he had seen, his goal was to introduce vendor incentive opportunities to a new audience: small- to mid- sized builders. So far his marketing has focused on Colorado, Arizona and South Carolina.

Builder Sourcing has 16 builder clients and a group of 20 building materials vendors who are anxious to extend new product lines, favorable pricing, rebates and discounts to a new client base.

George Hess, president of Vantage Homes, considers his company to be a medium-sized homebuilder, averaging 150 to 160 houses per year. The company builds in communities including Meridian Ranch, Cordera, Flying Horse and Wolf Ranch. The average sales price is $430,000.

It was a simple decision for me, he said, recalling his initial meeting with Schneider.

Vantage Homes has 60 full- and part-time employees. We could either focus on controlling costs, developing clear concise budgets and work with trade products - or we could chase money.

Hess joined Schneider's program in the fall of 2004. He said the program is paying benefits to his bottom line.

Builder Sourcing is like another trade partner, Hess said. Not only are we getting a lot more money back in rebates, but they've been able to introduce us to new manufacturers that offer upgrade or special product lines we can incorporate into our homes.

Hess has promoted Builder Sourcing within his Builder 20 peer group, a consortium of homebuilders that meets regularly to share ideas and best practices.

Marc Towne, director of purchasing and estimating for Classic Homes, the area's largest locally owned homebuilder, said that his company is considering adding an outsourced rebate recovery program to his operation in 2006.

We have to weigh the amount of time it currently takes to process reimbursement with the dollars generated, he said. I think any builder that builds 200 houses or more a year would benefit from this kind of outsourcing.

He said that obtaining rebates often involves many layers of time- consuming steps. An HVAC contractor, for example, might offer discounts on top of those offered by the furnace manufacturer - doubling the paperwork that must be submitted.

Schneider is optimistic about his company's potential in a still- mostly-unexplored marketplace.

I create value for both the builder and the supplier, he said. It's a big win to do a lot of business with as few vendors as possible. That's the concept I'm bringing to the market.

He also said that Builder Sourcing is not an all or nothing proposition.

There are lots of ways to bring value to both clients. We deliver a new tier of customers to our vendors who need a more cost- effective way to reach medium and small builders, he said. In return, our builders may get access to product lines because now they're part of a much larger buying group. And because we handle the paperwork, they get to focus on what they do best.